A Legal Perspective: The FCA's New Focus on Non-Financial Misconduct and What It Means for General Counsel for Financial Institutions

This article explores the FCA's new focus on non-financial misconduct ('NFM') and its implications for general counsel (GC) in financial institutions.

The FCA's New Focus on Non-Financial Misconduct

The FCA has increasingly prioritized non-financial misconduct, including behaviours such as bullying, harassment, and discrimination, as key indicators of a failing organizational culture. Sheppard emphasized that NFM is not just a human resources issue but a regulatory concern that directly impacts consumer outcomes, market integrity, and the broader economy. The FCA's recent survey revealed a significant increase in reported NFM incidents, highlighting the need for robust measures to address these behaviours.

Implications for General Counsel

General counsel (GC) in financial institutions must navigate the evolving regulatory landscape and ensure compliance with the FCA's heightened focus on NFM. Here are some key considerations for GCs:

1. Policy Development and Implementation: GCs should work closely with HR and compliance teams to develop and implement policies that address NFM. This includes clear definitions of unacceptable behaviours, reporting mechanisms, and disciplinary procedures.
2. Training and Awareness: Regular training programs should be conducted to raise awareness about NFM and its impact on organizational culture. Employees at all levels should understand the importance of maintaining a respectful and inclusive workplace.
3. Monitoring and Reporting: Establish robust systems for monitoring and reporting NFM incidents. This includes anonymous reporting channels and regular audits to ensure compliance with NFM policies.
4. Legal Risk Management: GCs should assess the legal risks associated with NFM and develop strategies to mitigate these risks. This includes reviewing employment contracts, updating grievance procedures, and ensuring that disciplinary actions are legally sound.
5. Stakeholder Communication: Transparent communication with stakeholders, including employees, shareholders, and regulators, is crucial. GCs should provide regular updates on the institution's efforts to address NFM and demonstrate a commitment to fostering a healthy workplace culture.

Recent Investigations into Bullying

1. FCA's Culture and Non-Financial Misconduct Survey: The Financial Conduct Authority (FCA) conducted a survey covering over 1,000 financial services firms, revealing a 72% increase in non-financial misconduct allegations between 2021 and 2023. Bullying and harassment accounted for26% of the complaints, making it one of the most reported issues.
2. Parliamentary Committee Hearings: In January 2024, a parliamentary committee published a summary of hearings into women's experiences in the financial industry. The hearings highlighted widespread misconduct and misogyny, with many women reporting bullying and harassment, particularly during conferences and work trips.

Conclusion

The FCA's new focus on non-financial misconduct represents a significant shift in regulatory priorities. General counsel in financial institutions must proactively address this issue to ensure compliance and protect the institution's reputation. By developing robust policies, conducting regular training, and fostering a culture of respect and inclusion, GCs can help create a positive and compliant workplace environment.